The yuan weakened Tuesday morning in both onshore and offshore markets, while the greenback retreated against other major currency peers before the release of minutes of the Federal Reserve’s May meeting later this week.
In the spot market in Shanghai, the US dollar bought 6.8907 per yuan as of 11.45am, up 0.06 per cent from 6.8864 in the prior session. On Monday, the dollar also rose slightly against the Chinese currency.
Domestic traders are allowed to buy or sell the yuan within 2 per cent of the yuan’s daily fixing level set by the People’s Bank of China (PBOC).
Earlier in the day, the PBOC fixed the yuan’s mid-point rate at 6.8661 per US dollar, stronger by 12 basis points from the previous fix of 6.8673.
In Hong Kong, the offshore yuan also weakened, with the US dollar trading at 6.8789 per yuan, compared with 6.8782 late Monday.
“Currently, markets are pricing in an approximately 70 per cent probability of a rate hike in June but only 60 per cent for one more rate hike in 2017,” said Stephen Innes, senior trader at Oanda Asia Pacific.
“If it becomes clear that the FOMC (the Federal Open Market Committee) are keen to move on interest rates beyond June, there remains some decent scope for year-end Fed repricing which should prop the dollar.”
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